Apple China is taking a variety of steps related to the China Coronavirus that is proving a textbook for other companies with deep supply chains in the middle kingdom.
Tim Cook, Apple’s CEO, has said that the company is shutting stores in cities in infected areas and has placed limits on employee travel in China. Additionally, the company is taking steps to make up for production shortages in Wuhan, which is home to some of the company’s suppliers, and is the central Chinese city where the corona virus originated.
Cook said, “We do have some suppliers in the Wuhan area. All of the suppliers there are alternate sources and we’re obviously working on mitigation plans to make up any expected production loss. With respect to supply sources that are outside the Wuhan area, the impact is less clear at this time.”
Apple has faced an abundance of challenges and made a remarkable comeback during the last year, but the China Corona Virus is a new challenge for the company. The company makes most of its hardware products in China and has a deep manufacturing and supply chain in the country.
Neil Mawston, Executive Director of the global wireless practice at Strategy Analytics, noted that smartphone factories typically hold two to eight weeks of components or device inventory, so there will is a guaranteed short-term buffer built into the production system for Apple and other manufacturers.
Mawston said that, “For now, supply chains for smartphones seem okay, but that can change. If any lockdown spreads and extends well into February or even March, then supply chains could start to get tight.”
Apple is looking at two problems related to its China business that are a result of the corona virus ... potential disruptions to its supply chains and manufacturing, as well as sales reductions in the company’s largest market outside of the U.S.
Because of the virus outbreak, companies and factories have had an extended Lunar New Year holiday, and many factories are reopening on February 10. At that time, companies like Apple will be better able to understand their supply chain inventories and manufacturing challenges and the company will be better able to make short and medium term contingency plans to respond to challenges that it may face.